Bombay High Court dismisses appeal by Iran government filed after a delay of 12 years; imposes ₹10 lakh costs

The Bombay High Court recently dismissed an appeal filed by the Islamic Republic of Iran (IRI) and also imposed costs of ₹10 lakh on the West Asian nation [Islamic Republic of Iran v. KT Steel Industries LLP & Anr.].A division bench of Justices KR Shriram and Rajesh Patil passed the order on an appeal filed by Iran challenging an ex-parte decree in a suit directing them to pay compensation worth over USD 35 lakh to an Indian company, KT Steel Industries LLP in a dispute over sale of railway wagons..The Islamic Republic of Iran (IRI) through the Iranian Islamic Republic Railways (RAI) had floated a global tender for purchase of railway wagons. The Indian government at that point was exporting wagons through the State Trading Corporation (STC).KT Steels submitted its bid through STC and STC entered into a purchase contract with Iranian government on March 16, 1970. STC assigned the benefit of the contract to KT Steels through a separate contract in November 1970. In 1972, due to spike in international oil prices, there was an increase in freight charges for shipment of wagons and in August 1976, the contract was amended. With this modification, the export continued until 1977. However, KT Steels claimed that IRI failed to pay the freight charges as agreed for 306 wagons in 1973 and 94 wagons shipped in 1977..KT Steels filed a suit in September 1996 but IRI never entered appearance.In the ex-parte judgment passed in 2008 by the then High Court judge Justice DY Chandrachud (currently the Chief Justice of India), the Court directed IRI to pay an amount of USD 1,387,727 for 304 wagons, USD 1,696,722 for 94 wagons and USD 484,840 towards damages, the total coming to USD 35,69,289.The Court also ordered an interest @9% per annum on the freight charges from date of instituting suit to the date of realisation of the amount..After 12 years and 10 days, RAI filed an appeal against this order in High Court claiming that the suit had been wrongfully filed against IRI, when it should in fact have been filed against RAI.RAI claimed that it discovered about the proceedings only in July 2019 after it received papers from the Ministry of Foreign Affairs of Iran. It thus filed an appeal on February 25, 2020.It apprised the Court that KT Steels had served the proceedings on the Iranian Consulate who had even replied stating it was not a commercial entity and enjoyed sovereign immunity..KT Steels meanwhile contended that after an application was filed in 2019 to execute the suit decree, it pleaded for disclosure of IRI’s assets. This application was also served on the Consulate General’s office in Mumbai in February 2019.KT Steels claimed an advocate had appeared for IRI, and the Court then ordered IRI to make a disclosure of its commercial assets and transactions in India within 4 weeks. It was after such an order was made that IRI filed this present appeal, KT Steels claimed.KT Steels also submitted that RAI was entirely overseen by the Iran government even though it was a separate legal entity..After hearing both parties at length, the Court accepted KT Steels’ arguments that IRI did not pay heed to the Court’s orders till a disclosure order was passed. The Court also noted that the appeal and condonation of delay application had been filed by IRI through RAI and the position that both parties were separate entities seemed to be an after thought.“We observe that the Iranian Government has chosen not to appear before this Court and still refuses to comply with Court’s orders. Applicant (IRI) has not made any submissions before this Court, but only RAI which is not even a party to the Appeal, has engaged a Counsel to appear,” the Court noted..It also reasoned that if IRI thought that Iranian courts had the exclusive jurisdiction to hear the dispute arising out of the 1976 contract, it ought to have pointed out the same in the suit. The Court noted that even in the appeals and its applications seeking urgent reliefs, the Court had directed the Iranian party to make disclosures of the commercial assets which it failed to do for over 3 years. It found no satisfactory explanation for this delay as well as the delay of 12 years and 10 days to file the appeal.In view of these observations, the Court dismissed the pleas filed by IRI and imposed cost of ₹10 lakh to be paid within 4 weeks to KT Steels. .Senior Advocate Aashish Kamat and advocates Ashutosh Bhadang, Mohd. Rehan Ansari, briefed by advocate Saeed Akhtar appeared for RAI.Senior Advocate Sharan Jagtiani along with advocates Vishal Narichania, Rahul Jain, Akriti Shikha briefed by HSA Advocates appeared for KT Steel.[Read Order]